Foreign bank presence and inclusive growth in Africa: the moderating role of financial development

Abstract

PurposeThe purpose of this study is to assess the extent to which the nexus between foreign bank presence (FBP) and inclusive growth is being impacted by the financial development.Design/methodology/approachThe study used a two-stage system generalized method of moment (GMM), using 28 African countries from the period 2000 to 2018.FindingsThe study found a positive effect of FBP on inclusive growth. While financial development magnifies the positive effect of FBP, inclusive growth nexus, it has a direct effect on inclusive growth.Practical implicationsFor Africa to ascertain the positive effect of FBP on inclusive growth, financial system must be developed to reduce the cream-skim behavior of foreign banks.Originality/valueThis paper assess the extent to which developing economy's developed financial system form synergies with FBP to further enhance the inclusiveness of growth.

Foreign bank presence and income inequality in Africa: What role does economic freedom play?

“…Starting with objective one, Table 4 shows that FBP reduces income inequality in Africa with a significant coefficient of 0.0055 at 1% significant level (see column 1). The negative effect implies that FBP can enrich local banking expertise, attracting skilled professionals and disseminating knowledge, thereby enhancing access to innovative financial services for marginalised groups [53,71]. The negative effect of FBP can also be attributed to the ability of foreign banks to stimulate competition in the banking sector of the host countries [17].…”

“…Nanivazo et al [16] found that FBP leads to poverty in Africa and hence concluded that FBP is associated with a higher income gap. Iddrisu et al [53] also found that in Africa, FBP advances inclusive growth, especially in the presence of a developed financial sector. One of the current studies made a significant contribution to FBP-income inequality nexus (see [20]).…”